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The Booze Is Flowing in China

TAIPEI ( TheStreet) -- One night about 10 years ago a friend took me to dinner in a working-class city outside Beijing. He ordered a grain alcohol that we drank till I can't remember when and tried to forget as soon as my clawing headache and nausea passed the next afternoon.

A few years later I had a chance to try another type of the clear-colored Chinese "baijiu," which is Mandarin for white wine. A government foreign affairs office leader in northeastern China had ordered the smoother, tangier liquor to celebrate after an interview that he helped arrange. No trouble the day after.

The first kind of experience is still being enjoyed by people with more fortitude than me, often on stools in the back alleys of Beijing. But a lot of middle-class drinkers have shifted from this old-time, made-in-China staple to beers and grape wines, both of which Chinese say go well with their meals. For high-end imbibers, however, the distilled grains still top hops.

And for a sober investor, there's a deal at both ends of the bar.

Some of the white wine replacements for China's ubiquitous middle class come from foreign brewers that are well known to any drinker offshore --
Anheuser-Busch(BUD) and
Molson Coors(TAP - Get Report), for example.

China's beer market grew 29% from 2006 to 2011 to a record high of 50 billion liters, twice that of the next biggest guzzler the U.S. (consider the obvious population size difference plus
strong domestic consumption), market research firm Mintel said in a report in June.

Market value for beer in China went up 63% to 454 billion yuan ($71.6 billion) over the same period. Mintel said the growth in value tracks rising personal incomes. That would make sense, as beer costs more than low-end spirits like the stuff I had 10 years ago. That costs just 2 to 5 yuan per bottle.

Year-on-year value growth in grape wines has slacked to 12% after 52% from 2006 to 2010, but the same measurement for spirits such as white wine grew just 24% year-on-year to 2010 and 16% to last year, Mintel says.